Examples
For example, in a stock option to buy 100 shares of Nokia at EUR 50 in April 2011, the underlying is a Nokia share. In a futures contract to buy EUR 10 million 10 year German Government Bonds, the underlying are the German Government bonds. Other examples are stock market indexes such as the Dow Jones Industrial Average and Nikkei 225, for which the underlying are the common stocks of 30 large U.S. companies and 225 Japanese companies, respectively.
Options on futures derivatives are an example of derivatives whose underlying is also a derivative. For example, Euro-Bund options (OGBL) are trade on Eurex and their underlying is the Euro-Bund futures contract (FGBL).
Read more about this topic: Underlying
Famous quotes containing the word examples:
“No rules exist, and examples are simply life-savers answering the appeals of rules making vain attempts to exist.”
—André Breton (1896–1966)
“There are many examples of women that have excelled in learning, and even in war, but this is no reason we should bring ‘em all up to Latin and Greek or else military discipline, instead of needle-work and housewifry.”
—Bernard Mandeville (1670–1733)
“In the examples that I here bring in of what I have [read], heard, done or said, I have refrained from daring to alter even the smallest and most indifferent circumstances. My conscience falsifies not an iota; for my knowledge I cannot answer.”
—Michel de Montaigne (1533–1592)